The Devil is in the details
Diabetic Investor does not want to rain on the medical device industry parade today but before everyone starts jumping for joy over President Obama’s op-ed piece in yesterday’s Wall Street Journal and the corresponding statements from the FDA, experience should tell us that talk is rather cheap in our nation’s capital.
Although Diabetic Investor supports the effort to promote innovation, lower costs and improve the efficiency of the approval process we will reserve our jumping for joy until we see these words put into action. And as much as we support this effort, what does it mean for the many companies who’ve been through the FDA meat grinder already and are now scrambling to recover.
Just as an example Diabetic Investor wonders how the people at Tandem Diabetes feel today. For those with short memories Tandem is another insulin pump company who made a big splash at last year’s American Association of Diabetes Educators (AADE) conference. At AADE Diabetic Investor sat down with the company to see what all the fuss was about. Few insulin pump companies generated as much buzz as Tandem as everyone kept telling Diabetic Investor this was one slick pump.
Yes the Tandem pump was way cool with its iPhone like design and patient friendly GUI interface. And not unexpectedly this sleek design generated lots of interest from educators hungry for anything new in the insulin pump market. Frankly Diabetic Investor wasn’t that impressed with the pump; while we liked the design the pump lacked some basic functionality found in existing insulin pumps already on the market. Still we knew the company really had no intention of taking on market leader Medtronic (NYSE:MDT) and like so many others in this space was hoping someone would come along and buy them once the pump was on the market.
All this changed when the FDA asked the company to conduct additional clinical trials which delayed approval and put the survival of the company in serious jeopardy. During our conversation at AADE company officials noted they had $35 million held in reserve, money that was supposed to be used to market the pump after FDA approval. Once the FDA decision came back, this money had to be reallocated to meet the FDA’s new requirements and the Tandem sales force, which the company had been building, all of sudden had nothing to sell.
Tandem is not the only company who must be shaking their heads today as time and time again diabetes medical device companies have been complaining long and loud about the FDA. Dexcom (NASDAQ:DXCM), Insulet (NASDAQ:PODD) and Intuity Medical are others who’ve noted the difficulty of getting new or improved versions of existing products through the agency.
At this point we’ll give the President a chance to make good on his words. With an election just two short years away and unemployment remaining a problem perhaps he realizes that you cannot regulate your way to growth. We further hope this is just the first step taken with the FDA as the drug approval process is also in serious need of overhaul.
Yet it would be wise to remember the words of David Brinkley who wrote; “As long as I’ve known anything about politics, I’ve been skeptical. And it has evolved. The more I saw, the more skeptical I became.”